##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the Quarterly Period Ended March 31, 2010

Or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from            
to

Commission File No. 001-34061





HSN, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 26-2590893                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)

1 HSN Drive, St. Petersburg, Florida 33729

(Address of principal executive offices, including zip code)

(727) 872-1000

(Registrants telephone number, including area code)





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.    Yes   x     No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definition of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  | x
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

As of May 3, 2010, the registrant had 57,359,767 shares of common stock outstanding.









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##### Table of Contents

HSN, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q



|                             |  |                                                                                                                            |  |     
|---------------------------- |  | -------------------------------------------------------------------------------------------------------------------------- |  | ----
|                             |  |                                                                                                                            |  | Page
|Part IFinancial Information |  | 3                                                                                                                         
|                             |  |                                                                                                                           
|Item 1.                      |  | Financial Statements (Unaudited)                                                                                           |  | 3   
|                             |  |                                                                                                                           
|                             |  | Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009                                   |  | 3   
|                             |  |                                                                                                                           
|                             |  | Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009                                                     |  | 4   
|                             |  |                                                                                                                           
|                             |  | Consolidated Statements of Shareholders Equity for the Three Months Ended March 31, 2010 and Year Ended December 31, 2009 |  | 5   
|                             |  |                                                                                                                           
|                             |  | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009                                   |  | 6   
|                             |  |                                                                                                                           
|                             |  | Notes to Consolidated Financial Statements                                                                                 |  | 7   
|                             |  |                                                                                                                           
|Item 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                      |  | 14  
|                             |  |                                                                                                                           
|Item 3.                      |  | Quantitative and Qualitative Disclosures About Market Risk                                                                 |  | 20  
|                             |  |                                                                                                                           
|Item 4.                      |  | Controls and Procedures                                                                                                    |  | 20  
|                             | 
|Part IIOther Information    |  | 21                                                                                                                        
|                             |  |                                                                                                                           
|Item 1.                      |  | Legal Proceedings                                                                                                          |  | 21  
|                             |  |                                                                                                                           
|Item 1A.                     |  | Risk Factors                                                                                                               |  | 21  
|                             |  |                                                                                                                           
|Item 2.                      |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                |  | 21  
|                             |  |                                                                                                                           
|Item 3.                      |  | Defaults Upon Senior Securities                                                                                            |  | 21  
|                             |  |                                                                                                                           
|Item 4.                      |  | Removed and Reserved                                                                                                       |  | 21  
|                             |  |                                                                                                                           
|Item 5.                      |  | Other Information                                                                                                          |  | 21  
|                             |  |                                                                                                                           
|Item 6.                      |  | Exhibits                                                                                                                   |  | 21  
|                             | 
|Signatures                   |  | 22                                                                                                                        



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##### Table of Contents

PART IFINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

HSN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



|                                                      |  |                             |         |   |      |   |         |  
|----------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                      |  | Three Months EndedMarch 31, |        
|                                                      |  | 2010                        |         |   | 2009 |  
|Net sales                                             |  | $                           | 683,213 |   |      | $ | 629,620 |  
|Cost of sales                                         |  |                             | 446,729 |   |      |   | 418,396 |  
|                                                      |  |                             |         |   |      |   |         |  
|Gross profit                                          |  |                             | 236,484 |   |      |   | 211,224 |  
|                                                      |  |                             |         |   |      |   |         |  
|Operating expenses:                                   |  |                             |         |   |      |   |         |  
|Selling and marketing                                 |  |                             | 120,499 |   |      |   | 122,517 |  
|General and administrative                            |  |                             | 54,439  |   |      |   | 51,710  |  
|Production and programming                            |  |                             | 14,100  |   |      |   | 13,503  |  
|Amortization of intangible assets                     |  |                             | 141     |   |      |   | 141     |  
|Depreciation                                          |  |                             | 9,810   |   |      |   | 9,451   |  
|                                                      |  |                             |         |   |      |   |         |  
|Total operating expenses                              |  |                             | 198,989 |   |      |   | 197,322 |  
|                                                      |  |                             |         |   |      |   |         |  
|Operating income                                      |  |                             | 37,495  |   |      |   | 13,902  |  
|                                                      |  |                             |         |   |      |   |         |  
|Other (expense) income:                               |  |                             |         |   |      |   |         |  
|Interest income                                       |  |                             | 82      |   |      |   | 34      |  
|Interest expense                                      |  |                             | (8,376  | ) |      |   | (8,950  | )
|                                                      |  |                             |         |   |      |   |         |  
|Total other expense, net                              |  |                             | (8,294  | ) |      |   | (8,916  | )
|                                                      |  |                             |         |   |      |   |         |  
|Income from continuing operations before income taxes |  |                             | 29,201  |   |      |   | 4,986   |  
|Income tax provision                                  |  |                             | (11,533 | ) |      |   | (2,004  | )
|                                                      |  |                             |         |   |      |   |         |  
|Income from continuing operations                     |  |                             | 17,668  |   |      |   | 2,982   |  
|Loss from discontinued operations, net of tax         |  |                             | (15     | ) |      |   | (28     | )
|                                                      |  |                             |         |   |      |   |         |  
|Net income                                            |  | $                           | 17,653  |   |      | $ | 2,954   |  
|                                                      |  |                             |         |   |      |   |         |  
|Income from continuing operations per share:          |  |                             |         |   |      |   |         |  
|Basic                                                 |  | $                           | 0.31    |   |      | $ | 0.05    |  
|Diluted                                               |  | $                           | 0.30    |   |      | $ | 0.05    |  
|Net income per share:                                 |  |                             |         |   |      |   |         |  
|Basic                                                 |  | $                           | 0.31    |   |      | $ | 0.05    |  
|Diluted                                               |  | $                           | 0.30    |   |      | $ | 0.05    |  
|Shares used in computing earnings per share:          |  |                             |         |   |      |   |         |  
|Basic                                                 |  |                             | 56,800  |   |      |   | 56,339  |  
|Diluted                                               |  |                             | 59,045  |   |      |   | 56,781  |  

The accompanying Notes
to Consolidated Financial Statements are an integral part of these statements.



3



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HSN, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)



|                                                                                                                                                            |  |               |            |   |                  |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | - | ---------------- | - | ---------- | -
|                                                                                                                                                            |  | March 31,2010 |            |   | December 31,2009 |  
|ASSETS                                                                                                                                                      |  |               |            |   |                  |   |            |  
|Current assets:                                                                                                                                             |  |               |            |   |                  |   |            |  
|Cash and cash equivalents                                                                                                                                   |  | $             | 261,080    |   |                  | $ | 269,921    |  
|Accounts receivable, net of allowance of $13,074 and $11,608, respectively                                                                                  |  |               | 143,449    |   |                  |   | 182,746    |  
|Inventories                                                                                                                                                 |  |               | 271,773    |   |                  |   | 261,473    |  
|Deferred income taxes                                                                                                                                       |  |               | 22,059     |   |                  |   | 21,960     |  
|Prepaid expenses and other current assets                                                                                                                   |  |               | 42,231     |   |                  |   | 47,152     |  
|                                                                                                                                                            |  |               |            |   |                  |   |            |  
|Total current assets                                                                                                                                        |  |               | 740,592    |   |                  |   | 783,252    |  
|Property and equipment, net                                                                                                                                 |  |               | 152,045    |   |                  |   | 157,051    |  
|Intangible assets, net                                                                                                                                      |  |               | 261,045    |   |                  |   | 261,185    |  
|Other non-current assets                                                                                                                                    |  |               | 16,686     |   |                  |   | 17,162     |  
|                                                                                                                                                            |  |               |            |   |                  |   |            |  
|TOTAL ASSETS                                                                                                                                                |  | $             | 1,170,368  |   |                  | $ | 1,218,650  |  
|                                                                                                                                                            |  |               |            |   |                  |   |            |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                        |  |               |            |   |                  |   |            |  
|Current liabilities:                                                                                                                                        |  |               |            |   |                  |   |            |  
|Accounts payable, trade                                                                                                                                     |  | $             | 186,462    |   |                  | $ | 222,787    |  
|Current maturities of long-term debt                                                                                                                        |  |               | 6,349      |   |                  |   | 4,762      |  
|Accrued expenses and other current liabilities                                                                                                              |  |               | 181,843    |   |                  |   | 222,739    |  
|                                                                                                                                                            |  |               |            |   |                  |   |            |  
|Total current liabilities                                                                                                                                   |  |               | 374,654    |   |                  |   | 450,288    |  
|Long-term debt, net of current maturities                                                                                                                   |  |               | 327,660    |   |                  |   | 333,960    |  
|Deferred income taxes                                                                                                                                       |  |               | 77,934     |   |                  |   | 76,413     |  
|Other long-term liabilities                                                                                                                                 |  |               | 14,912     |   |                  |   | 13,959     |  
|                                                                                                                                                            |  |               |            |   |                  |   |            |  
|Total liabilities                                                                                                                                           |  |               | 795,160    |   |                  |   | 874,620    |  
|                                                                                                                                                            |  |               |            |   |                  |   |            |  
|Commitments and contingencies (Note 11)                                                                                                                     |  |               |            |   |                  |   |            |  
|SHAREHOLDERS EQUITY:                                                                                                                                       |  |               |            |   |                  |   |            |  
|Preferred stock, $0.01 par value; 25,000,000 authorized shares; no issued shares                                                                            |  |               |           |   |                  |   |           |  
|Common stock, $0.01 par value; 300,000,000 authorized shares; 57,299,518 and 56,503,163 issued shares at March 31, 2010 and
December 31, 2009, respectively |  |               | 573        |   |                  |   | 565        |  
|Additional paid-in capital                                                                                                                                  |  |               | 2,433,252  |   |                  |   | 2,419,765  |  
|Retained deficit                                                                                                                                            |  |               | (2,058,393 | ) |                  |   | (2,076,046 | )
|Accumulated other comprehensive loss                                                                                                                        |  |               | (224       | ) |                  |   | (254       | )
|                                                                                                                                                            |  |               |            |   |                  |   |            |  
|Total shareholders equity                                                                                                                                  |  |               | 375,208    |   |                  |   | 344,030    |  
|                                                                                                                                                            |  |               |            |   |                  |   |            |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                  |  | $             | 1,170,368  |   |                  | $ | 1,218,650  |  
|                                                                                                                                                            |  |               |            |   |                  |   |            |  

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.



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HSN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

(In thousands)

(Unaudited)



|                                                                                              |  |                 |  |              |   |                           |        |                 |   |     |                                   |   |           |       |   |            |   |  |   |      |   |  |   |         |  
|--------------------------------------------------------------------------------------------- |  | --------------- |  | ------------ | - | ------------------------- | ------ | --------------- | - | --- | --------------------------------- | - | --------- | ----- | - | ---------- | - |  | - | ---- | - |  | - | ------- | -
|                                                                                              |  | Preferred Stock |  | Common Stock |   | AdditionalPaid-in Capital |        | RetainedDeficit |   |     | AccumulatedOtherComprehensiveLoss |   |           | Total |  
|                                                                                              |  | Shares          |  | Amount       |   | Shares                    |        | Amount          |   |     |                                   |  
|Balance as of December 31, 2008                                                               |  |                |  | $            |  |                           | 56,222 |                 | $ | 562 |                                   | $ | 2,406,503 |       | $ | (2,148,534 | ) |  | $ | (246 | ) |  | $ | 258,285 |  
|Comprehensive income:                                                                         |  |                 |  |              |   |                           |        |                 |   |     |                                   |   |           |       |   |            |   |  |   |      |   |  |   |         |  
|Net income                                                                                    |  |                |  |              |  |                           |       |                 |   |    |                                   |   |          |       |   | 72,488     |   |  |   |     |   |  |   | 72,488  |  
|Foreign currency translation                                                                  |  |                |  |              |  |                           |       |                 |   |    |                                   |   |          |       |   |           |   |  |   | (8   | ) |  |   | (8      | )
|                                                                                              |  |                 |  |              |   |                           |        |                 |   |     |                                   |   |           |       |   |            |   |  |   |      |   |  |   |         |  
|Total comprehensive income                                                                    |  |                 |  |              |   |                           |        |                 |   |     |                                   |   |           |       |   |            |   |  |   |      |   |  |   | 72,480  |  
|Stock-based compensation expense for equity awards                                            |  |                |  |              |  |                           |       |                 |   |    |                                   |   | 11,264    |       |   |           |   |  |   |     |   |  |   | 11,264  |  
|Adjustment to capitalization as a result of the spin-off                                      |  |                |  |              |  |                           |       |                 |   |    |                                   |   | 406       |       |   |           |   |  |   |     |   |  |   | 406     |  
|Board of Directors deferred compensation                                                      |  |                |  |              |  |                           |       |                 |   |    |                                   |   | 127       |       |   |           |   |  |   |     |   |  |   | 127     |  
|Issuance of common stock upon exercise of stock options and release of restricted stock units |  |                |  |              |  |                           | 281    |                 |   | 3   |                                   |   | 1,465     |       |   |           |   |  |   |     |   |  |   | 1,468   |  
|                                                                                              |  |                 |  |              |   |                           |        |                 |   |     |                                   |   |           |       |   |            |   |  |   |      |   |  |   |         |  
|Balance as of December 31, 2009                                                               |  |                |  |              |  |                           | 56,503 |                 |   | 565 |                                   |   | 2,419,765 |       |   | (2,076,046 | ) |  |   | (254 | ) |  |   | 344,030 |  
|Comprehensive income:                                                                         |  |                 |  |              |   |                           |        |                 |   |     |                                   |   |           |       |   |            |   |  |   |      |   |  |   |         |  
|Net income                                                                                    |  |                |  |              |  |                           |       |                 |   |    |                                   |   |          |       |   | 17,653     |   |  |   |     |   |  |   | 17,653  |  
|Foreign currency translation                                                                  |  |                |  |              |  |                           |       |                 |   |    |                                   |   |          |       |   |           |   |  |   | 30   |   |  |   | 30      |  
|                                                                                              |  |                 |  |              |   |                           |        |                 |   |     |                                   |   |           |       |   |            |   |  |   |      |   |  |   |         |  
|Total comprehensive income                                                                    |  |                 |  |              |   |                           |        |                 |   |     |                                   |   |           |       |   |            |   |  |   |      |   |  |   | 17,683  |  
|Stock-based compensation expense for equity awards                                            |  |                |  |              |  |                           |       |                 |   |    |                                   |   | 3,843     |       |   |           |   |  |   |     |   |  |   | 3,843   |  
|Board of Directors deferred compensation                                                      |  |                |  |              |  |                           |       |                 |   |    |                                   |   | 32        |       |   |           |   |  |   |     |   |  |   | 32      |  
|Issuance of common stock upon exercise of stock options and release of restricted stock units |  |                |  |              |  |                           | 797    |                 |   | 8   |                                   |   | 9,612     |       |   |           |   |  |   |     |   |  |   | 9,620   |  
|                                                                                              |  |                 |  |              |   |                           |        |                 |   |     |                                   |   |           |       |   |            |   |  |   |      |   |  |   |         |  
|Balance as of March 31, 2010                                                                  |  |                |  | $            |  |                           | 57,300 |                 | $ | 573 |                                   | $ | 2,433,252 |       | $ | (2,058,393 | ) |  | $ | (224 | ) |  | $ | 375,208 |  
|                                                                                              |  |                 |  |              |   |                           |        |                 |   |     |                                   |   |           |       |   |            |   |  |   |      |   |  |   |         |  

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.



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HSN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                                                                                         |  |                             |         |   |      |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                                                                         |  | Three Months EndedMarch 31, |        
|                                                                                                                                                         |  | 2010                        |         |   | 2009 |  
|Cash flows from operating activities attributable to continuing operations:                                                                              |  |                             |         |   |      |   |         |  
|Net income                                                                                                                                               |  | $                           | 17,653  |   |      | $ | 2,954   |  
|Less: Loss from discontinued operations, net of tax                                                                                                      |  |                             | (15     | ) |      |   | (28     | )
|                                                                                                                                                         |  |                             |         |   |      |   |         |  
|Income from continuing operations                                                                                                                        |  |                             | 17,668  |   |      |   | 2,982   |  
|Adjustments to reconcile income from continuing operations to net cash (used in) provided by operating activities attributable to
continuing operations: |  |                             |         |   |      |   |         |  
|Depreciation                                                                                                                                             |  |                             | 9,810   |   |      |   | 9,451   |  
|Amortization of intangible assets                                                                                                                        |  |                             | 141     |   |      |   | 141     |  
|Stock-based compensation expense                                                                                                                         |  |                             | 4,343   |   |      |   | 2,547   |  
|Amortization of cable and satellite distribution fees                                                                                                    |  |                             | 840     |   |      |   | 841     |  
|Amortization of debt issuance costs                                                                                                                      |  |                             | 643     |   |      |   | 643     |  
|Loss on disposition of fixed assets                                                                                                                      |  |                             | 3       |   |      |   | 39      |  
|Deferred income taxes                                                                                                                                    |  |                             | 1,422   |   |      |   | (435    | )
|Bad debt expense                                                                                                                                         |  |                             | 4,882   |   |      |   | 4,516   |  
|Excess tax benefits from stock-based awards                                                                                                              |  |                             | (468    | ) |      |   |        |  
|Changes in current assets and liabilities:                                                                                                               |  |                             |         |   |      |   |         |  
|Accounts receivable                                                                                                                                      |  |                             | 33,669  |   |      |   | 34,074  |  
|Inventories                                                                                                                                              |  |                             | (10,300 | ) |      |   | 29,831  |  
|Prepaid expenses and other current assets                                                                                                                |  |                             | 3,963   |   |      |   | (4,838  | )
|Accounts payable, accrued expenses and other current liabilities                                                                                         |  |                             | (76,618 | ) |      |   | (40,155 | )
|                                                                                                                                                         |  |                             |         |   |      |   |         |  
|Net cash (used in) provided by operating activities attributable to continuing operations                                                                |  |                             | (10,002 | ) |      |   | 39,637  |  
|                                                                                                                                                         |  |                             |         |   |      |   |         |  
|Cash flows from investing activities attributable to continuing operations:                                                                              |  |                             |         |   |      |   |         |  
|Capital expenditures                                                                                                                                     |  |                             | (4,907  | ) |      |   | (7,517  | )
|                                                                                                                                                         |  |                             |         |   |      |   |         |  
|Net cash used in investing activities attributable to continuing operations                                                                              |  |                             | (4,907  | ) |      |   | (7,517  | )
|                                                                                                                                                         |  |                             |         |   |      |   |         |  
|Cash flows from financing activities attributable to continuing operations:                                                                              |  |                             |         |   |      |   |         |  
|Repayment under revolving credit facility                                                                                                                |  |                             |        |   |      |   | (20,000 | )
|Repayment of long-term debt                                                                                                                              |  |                             | (4,762  | ) |      |   | (3,750  | )
|Proceeds received from stock option exercises                                                                                                            |  |                             | 10,369  |   |      |   |        |  
|Excess tax benefits from stock-based awards                                                                                                              |  |                             | 468     |   |      |   |        |  
|                                                                                                                                                         |  |                             |         |   |      |   |         |  
|Net cash provided by (used in) financing activities attributable to continuing operations                                                                |  |                             | 6,075   |   |      |   | (23,750 | )
|                                                                                                                                                         |  |                             |         |   |      |   |         |  
|Total cash (used in) provided by continuing operations                                                                                                   |  |                             | (8,834  | ) |      |   | 8,370   |  
|Total cash (used in) provided by operating activities attributable to discontinued operations                                                            |  |                             | (7      | ) |      |   | 1,066   |  
|                                                                                                                                                         |  |                             |         |   |      |   |         |  
|Net (decrease) increase in cash and cash equivalents                                                                                                     |  |                             | (8,841  | ) |      |   | 9,436   |  
|Cash and cash equivalents at beginning of period                                                                                                         |  |                             | 269,921 |   |      |   | 177,463 |  
|                                                                                                                                                         |  |                             |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                                                                                               |  | $                           | 261,080 |   |      | $ | 186,899 |  
|                                                                                                                                                         |  |                             |         |   |      |   |         |  

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.



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HSN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE
1ORGANIZATION

Company Overview

HSN, Inc. (HSNi) markets and sells a wide range of third party and private label merchandise directly to consumers through
(i) television home shopping programming broadcast on the HSN television network; (ii) catalogs, which consist primarily of the Cornerstone portfolio of leading print catalogs which includes Frontgate, Garnet Hill, Ballard Designs,
Improvements, Smith+Noble, The Territory Ahead and TravelSmith; (iii) websites, which consist primarily of HSN.com and the seven branded websites operated by Cornerstone; and (iv) retail stores. HSNis television home shopping
business and related internet commerce is referred to herein as HSN and all catalog operations, including related internet commerce and retail stores, are collectively referred to herein as Cornerstone.

HSN offerings primarily consist of jewelry, apparel & accessories, health & beauty and home & other.
Merchandise offered by Cornerstone primarily consists of home furnishings (including indoor/outdoor furniture, window treatments and other home related goods) and apparel & accessories.

Basis of Presentation

HSNi was incorporated in Delaware in May 2008 in connection with the spin-off of several businesses previously owned by
IAC/InterActiveCorp, or IAC. The spin-off from IAC occurred August 20, 2008 concurrent with the spin-offs from IAC of Interval Leisure Group, Inc., Ticketmaster Entertainment, Inc., and Tree.com, Inc. Throughout these financial statements, the
separation transaction is referred to as the spin-off and each of these companies as Spincos. Effective August 21, 2008, HSNis shares began trading on the NASDAQ Global Select Market under the symbol
HSNI.

HSNi has accounted for its international subsidiaries as a discontinued operation. The results of
operations and cash flows of these subsidiaries have been presented as discontinued operations within the consolidated statements of operations and consolidated statements of cash flows for all periods presented.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting
principles (GAAP) for interim financial information and with the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and notes required by GAAP
for complete financial statements. In the opinion of HSNis management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of
the results that may be expected for a full year. The accompanying unaudited consolidated financial statements should be read in conjunction with HSNis audited consolidated financial statements and notes thereto for the year ended
December 31, 2009. The consolidated balance sheet as of December 31, 2009 and the consolidated statement of shareholders equity for the year ended December 31, 2009 were derived from the audited consolidated financial statements
at that date but may not include all disclosures required by GAAP. Intercompany transactions and accounts have been eliminated in consolidation.

NOTE 2SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates

HSNis management is required to make certain estimates and assumptions during the preparation of its consolidated financial
statements in accordance with GAAP. These estimates and assumptions impact the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact
the reported amount of net earnings during any period. Actual results could differ from those estimates. In the opinion of HSNis management, the assumptions underlying these interim unaudited financial statements are reasonable.

Significant estimates underlying the accompanying consolidated financial statements include: the determination of the lower of cost or
market adjustment for inventory; sales returns and other revenue allowances; the allowance for doubtful accounts; the recoverability of long-lived and intangible assets; the determination of deferred income taxes, including related valuation
allowances; the accrual for actual, pending or threatened litigation, claims and assessments; and assumptions related to the determination of stock-based compensation.



7



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NOTE 3PROPERTY AND EQUIPMENT

The balance of property and equipment, net, is as follows (in thousands):



|                                                |  |               |          |   |                  |   |          |  
|----------------------------------------------- |  | ------------- | -------- | - | ---------------- | - | -------- | -
|                                                |  | March 31,2010 |          |   | December 31,2009 |  
|Capitalized software                            |  | $             | 194,827  |   |                  | $ | 190,331  |  
|Computer and broadcast equipment                |  |               | 88,053   |   |                  |   | 89,001   |  
|Buildings and leasehold improvements            |  |               | 82,512   |   |                  |   | 81,937   |  
|Furniture and other equipment                   |  |               | 67,654   |   |                  |   | 66,861   |  
|Projects in progress                            |  |               | 12,835   |   |                  |   | 13,207   |  
|Land and land improvements                      |  |               | 11,861   |   |                  |   | 11,847   |  
|                                                |  |               |          |   |                  |   |          |  
|                                                |  |               | 457,742  |   |                  |   | 453,184  |  
|Less: accumulated depreciation and amortization |  |               | (305,697 | ) |                  |   | (296,133 | )
|                                                |  |               |          |   |                  |   |          |  
|Total property and equipment, net               |  | $             | 152,045  |   |                  | $ | 157,051  |  
|                                                |  |               |          |   |                  |   |          |  

NOTE 4SEGMENT INFORMATION

HSNi has determined to represent its operating segments and related financial information in a manner consistent with how the chief
operating decision maker and executive management view the businesses, how the businesses are organized as to segment management, and the focus of the businesses with regards to the types of products or services offered or the target market. HSNi
has two operating segments, HSN and Cornerstone. Entities included in discontinued operations are excluded from the schedules below. The accounting policies of the segments are the same as those described in Note 2  Summary of Significant
Accounting Policies included in HSNis Annual Report on Form 10-K for the year ended December 31, 2009. Intercompany accounts and transactions have been eliminated in consolidation.

HSNis primary metric is Adjusted EBITDA, which is defined as operating income excluding, if applicable: (1) stock-based
compensation expense and amortization of non-cash marketing, (2) amortization of intangibles, (3) depreciation and gains and losses on asset dispositions, (4) goodwill, long-lived asset and intangible asset impairments, (5) pro
forma adjustments for significant acquisitions, and (6) one-time items. Adjusted EBITDA is not a measure determined in accordance with GAAP, and should not be considered in isolation or as a substitute for operating income, net income or any
other measure determined in accordance with GAAP. Adjusted EBITDA is used as a measurement of operating efficiency and overall financial performance and HSNi believes it to be a helpful measure for those evaluating companies in the retail and media
industries. Adjusted EBITDA measures the amount of income generated each period that could be used to service debt, pay taxes and fund capital expenditures. Adjusted EBITDA has certain limitations in that it does not take into account the impact to
HSNis consolidated statements of operations of certain expenses, including stock-based compensation, amortization of non-cash marketing, amortization of intangibles, depreciation, gains and losses on asset dispositions, asset impairment
charges, acquisition-related accounting and one-time items.

The following tables reconcile Adjusted EBITDA to operating
income (loss) for HSNis operating segments (in thousands):



|                                    |  |                                   |        |                                   |   |        |       |  |     |        |             |   |        |       |   |         |   |  |   |       
|----------------------------------- |  | --------------------------------- | ------ | --------------------------------- | - | ------ | ----- |  | --- | ------ | ----------- | - | ------ | ----- | - | ------- | - |  | - | ------
|                                    |  | Three Months Ended March 31, 2010 |        | Three Months Ended March 31, 2009
|                                    |  | HSN                               |        | Cornerstone                       |   |        | Total |  | HSN |        | Cornerstone |   |        | Total
|Operating income (loss)             |  | $                                 | 39,295 |                                   | $ | (1,800 | )     |  | $   | 37,495 |             | $ | 26,151 |       | $ | (12,249 | ) |  | $ | 13,902
|Stock-based compensation expense    |  |                                   | 3,271  |                                   |   | 1,072  |       |  |     | 4,343  |             |   | 1,955  |       |   | 592     |   |  |   | 2,547 
|Amortization of intangible assets   |  |                                   | 141    |                                   |   |       |       |  |     | 141    |             |   | 141    |       |   |        |   |  |   | 141   
|Depreciation                        |  |                                   | 7,605  |                                   |   | 2,205  |       |  |     | 9,810  |             |   | 6,974  |       |   | 2,477   |   |  |   | 9,451 
|Loss on disposition of fixed assets |  |                                   | 2      |                                   |   | 1      |       |  |     | 3      |             |   | 38     |       |   | 1       |   |  |   | 39    
|                                    |  |                                   |        |                                   |   |        |       |  |     |        |             |   |        |       |   |         |   |  |   |       
|Adjusted EBITDA                     |  | $                                 | 50,314 |                                   | $ | 1,478  |       |  | $   | 51,792 |             | $ | 35,259 |       | $ | (9,179  | ) |  | $ | 26,080
|                                    |  |                                   |        |                                   |   |        |       |  |     |        |             |   |        |       |   |         |   |  |   |       



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The net sales for each of HSNis reportable segments are as follows (in thousands):



|            |  |                             |         |      |   |        
|----------- |  | --------------------------- | ------- | ---- | - | -------
|            |  | Three Months EndedMarch 31,
|            |  | 2010                        |         | 2009
|Net sales:  |  |                             |         |      |   |        
|HSN         |  | $                           | 518,919 |      | $ | 474,928
|Cornerstone |  |                             | 164,294 |      |   | 154,692
|            |  |                             |         |      |   |        
|Total       |  | $                           | 683,213 |      | $ | 629,620
|            |  |                             |         |      |   |        

NOTE 5COMPREHENSIVE INCOME

Comprehensive income is comprised of (in thousands):



|                           |  |                             |        |      |   |      
|-------------------------- |  | --------------------------- | ------ | ---- | - | -----
|                           |  | Three Months EndedMarch 31,
|                           |  | 2010                        |        | 2009
|Net income                 |  | $                           | 17,653 |      | $ | 2,954
|Other comprehensive income |  |                             | 30     |      |   | 30   
|                           |  |                             |        |      |   |      
|Total comprehensive income |  | $                           | 17,683 |      | $ | 2,984
|                           |  |                             |        |      |   |      

Accumulated other comprehensive loss included in the
consolidated balance sheets at March 31, 2010 and December 31, 2009 is solely related to foreign currency translation and is recorded net of tax.

NOTE 6STOCK-BASED AWARDS

The Second Amended and Restated 2008 Stock and Annual Incentive Plan (the Plan) authorizes the issuance of 8.0 million
shares of HSNi common stock for new awards granted by HSNi. As of March 31, 2010, there were approximately 3.4 million shares of common stock available for grants under the Plan. The purpose of the Plan is to assist HSNi in attracting,
retaining and motivating officers, employees, directors and consultants, and to provide HSNi with the ability to provide incentives more directly linked to the profitability of HSNis business and increases in shareholder value.

HSNi can grant restricted stock units (RSUs), stock options, stock appreciation rights (SARs) and other
stock-based awards under the Plan. Stock-based awards have a maximum term of 10 years. The exercise price of options and SARs granted under the Plan are required to be priced at or above the fair market value of HSNis stock on the date of
grant.

During the three months ended March 31, 2010, HSNi granted approximately 391,000 RSUs and 507,000 stock-settled
SARs. The weighted average fair value of these RSUs was $20.14 and they primarily vest over three years. The stock-settled SARs have a weighted average exercise price of $20.30, have a fair value of $8.79 and primarily vest ratably over three years.
The following are the assumptions used in the Black-Scholes option pricing model to value SARs for the three months ended March 31, 2010: volatility factor of 46.51%, risk-free interest rate of 2.39%, expected term of 5 years and a dividend
yield of zero.



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Stock-based compensation expense is included in the following line items in the accompanying
consolidated statements of operations (in thousands):



|                                                     |  |                             |        |   |      |   |       |  
|---------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ----- | -
|                                                     |  | Three Months EndedMarch 31, |       
|                                                     |  | 2010                        |        |   | 2009 |  
|Selling and marketing                                |  | $                           | 828    |   |      | $ | 454   |  
|General and administrative                           |  |                             | 3,258  |   |      |   | 1,943 |  
|Production and programming                           |  |                             | 257    |   |      |   | 150   |  
|                                                     |  |                             |        |   |      |   |       |  
|Stock-based compensation expense before income taxes |  |                             | 4,343  |   |      |   | 2,547 |  
|Income tax benefit                                   |  |                             | (1,574 | ) |      |   | (993  | )
|                                                     |  |                             |        |   |      |   |       |  
|Stock-based compensation expense after income taxes  |  | $                           | 2,769  |   |      | $ | 1,554 |  
|                                                     |  |                             |        |   |      |   |       |  

Included in stock-based compensation expense are equity awards accounted for as liabilities which are marked
to market each reporting period through earnings. As of March 31, 2010, a liability of approximately $0.5 million was recorded for these awards.

As of March 31, 2010, there was approximately $28.3 million of unrecognized compensation cost, net of estimated forfeitures,
related to all equity-based awards, which is currently expected to be recognized over a weighted average period of approximately 2.3 years.

NOTE 7INCOME TAXES

HSNi calculates its interim income tax provision in accordance with the guidance pertaining to the accounting for income taxes in interim
periods. At the end of each interim period, HSNi makes its best estimate of the annual expected effective tax rate and applies that rate to its ordinary year-to-date income or loss. The tax or benefit related to significant, unusual, or
extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur.

In addition, the effect of changes in enacted tax laws or rates, tax status, or judgment on the realizability of a beginning-of-the-year
deferred tax asset in future years is recognized in the interim period in which the change occurs.

The computation of the
annual expected effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating income for the year, permanent and temporary differences, and the likelihood of recovering
deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is acquired, additional information is obtained or the tax environment
changes. To the extent that the estimated annual effective tax rate changes during a quarter, the effect of the change on prior quarters is included in tax expense for the current quarter.

For the three months ended March 31, 2010 and 2009, HSNi recorded a tax provision from continuing operations of $11.5 million
and $2.0 million, respectively, which represents effective tax rates of 39.5% and 40.2%, respectively. The effective tax rates exceed the federal statutory rate of 35.0% due principally to state income taxes.

As a result of the spin-off, HSNi entered into a Tax Sharing Agreement with IAC in which, among other things, each of the Spincos has
indemnified IAC and the other Spincos for any taxes resulting from the spin-off of such Spinco (and any related interest, penalties, legal and professional fees, and all costs and damages associated with related shareholder litigation or
controversies) to the extent such amounts result from (i) any act or failure to act by such Spinco described in the covenants in the Tax Sharing Agreement, (ii) any acquisition of equity securities or assets of such Spinco or a member of
its group, and (iii) any breach by such Spinco or any member of its group of any representation or covenant contained in the separation documents or in the documents relating to the IRS private letter ruling and/or tax opinions. Additionally,
under the Tax Sharing Agreement, with respect to the consolidated federal income tax return of IAC and its subsidiaries for any taxable year that includes HSNi, IAC shall determine in its sole discretion whether to elect ratable allocation under
applicable U.S. Treasury Regulations. HSNi shall, and shall cause each member of its group to, take all actions necessary to give effect to such election. In the event an adjustment with respect to a pre-spin-off period for which IAC is responsible
results in a tax benefit to HSNi in a post-spin-off period, HSNi will be required to pay such tax benefit to IAC. In general, IAC controls all audits and administrative matters and other tax proceedings relating to the consolidated federal income
tax return of the IAC group and any other tax returns for which the IAC group is responsible. The provisions set forth in the Tax Sharing Agreement could subject HSNi to future tax contingencies.



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HSNi is routinely under audit by federal, state, local and foreign tax authorities. These
audits include questioning the timing and the amount of deductions and the allocation of income among various tax jurisdictions. Income taxes payable include amounts considered sufficient to pay assessments that may result from examination of prior
year returns; however, the amount paid upon resolution of issues raised may differ from the amount provided. Differences between the reserves for tax contingencies and the amounts owed by HSNi are recorded in the period they become known.

The Internal Revenue Service (IRS) is currently examining the IAC consolidated tax returns for the years ended
December 31, 2001 through 2006, which includes the operations of HSNi. The statute of limitations for these years has been extended to December 31, 2010. Various IAC consolidated tax returns filed with state, local and foreign
jurisdictions are currently under examination, the most significant of which are California, New York and New York City, for various tax years after December 31, 2003. These examinations are expected to be completed by 2011. By virtue of the
Tax Sharing Agreement with IAC, HSNi is indemnified with respect to additional tax liabilities for consolidated or combined federal tax returns prepared and filed by IAC prior to the spin-off, but is liable for any additional tax liabilities for
HSNi separately filed state income tax returns.

NOTE 8EARNINGS PER SHARE

HSNi computes earnings per share in accordance with the current guidance set forth by the FASB. HSNi computes basic earnings per share
using the weighted average number of common shares outstanding for the period. HSNi computes diluted earnings per share using the treasury stock method or as if converted method, as applicable, which includes the weighted average number of common
shares outstanding for the period plus the potential dilution that could occur if various equity awards to issue common stock were exercised or restricted equity awards were vested resulting in the issuance of common stock that could share in
HSNis earnings.

The following table presents HSNis basic and diluted earnings per share (in thousands, except per
share data):



|                                                                                                                                                                                                 |  |                             |        |   |      |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                                                                                                                                 |  | Three Months EndedMarch 31, |       
|                                                                                                                                                                                                 |  | 2010                        |        |   | 2009 |  
|Net income:                                                                                                                                                                                      |  |                             |        |   |      |   |        |  
|Continuing operations                                                                                                                                                                            |  | $                           | 17,668 |   |      | $ | 2,982  |  
|Discontinued operations                                                                                                                                                                          |  |                             | (15    | ) |      |   | (28    | )
|                                                                                                                                                                                                 |  |                             |        |   |      |   |        |  
|Net income                                                                                                                                                                                       |  | $                           | 17,653 |   |      | $ | 2,954  |  
|                                                                                                                                                                                                 |  |                             |        |   |      |   |        |  
|                                                                                                                                                                                                 |  |                            
|Weighted average number of shares outstanding:                                                                                                                                                   |  |                             |        |   |      |   |        |  
|Basic                                                                                                                                                                                            |  |                             | 56,800 |   |      |   | 56,339 |  
|Dilutive effect of stock-based compensation awards                                                                                                                                               |  |                             | 2,245  |   |      |   | 442    |  
|                                                                                                                                                                                                 |  |                             |        |   |      |   |        |  
|Diluted                                                                                                                                                                                          |  |                             | 59,045 |   |      |   | 56,781 |  
|                                                                                                                                                                                                 |  |                             |        |   |      |   |        |  
|                                                                                                                                                                                                 |  |                            
|Net income per share - basic:                                                                                                                                                                    |  |                             |        |   |      |   |        |  
|Continuing operations                                                                                                                                                                            |  | $                           | 0.31   |   |      | $ | 0.05   |  
|Discontinued operations                                                                                                                                                                          |  |                             | (0.00  | ) |      |   | (0.00  | )
|                                                                                                                                                                                                 |  |                             |        |   |      |   |        |  
|Net income                                                                                                                                                                                       |  | $                           | 0.31   |   |      | $ | 0.05   |  
|                                                                                                                                                                                                 |  |                             |        |   |      |   |        |  
|                                                                                                                                                                                                 |  |                            
|Net income per share - diluted:                                                                                                                                                                  |  |                             |        |   |      |   |        |  
|Continuing operations                                                                                                                                                                            |  | $                           | 0.30   |   |      | $ | 0.05   |  
|Discontinued operations                                                                                                                                                                          |  |                             | (0.00  | ) |      |   | (0.00  | )
|                                                                                                                                                                                                 |  |                             |        |   |      |   |        |  
|Net income                                                                                                                                                                                       |  | $                           | 0.30   |   |      | $ | 0.05   |  
|                                                                                                                                                                                                 |  |                             |        |   |      |   |        |  
|                                                                                                                                                                                                 |  |                            
|Unexercised employee stock options and stock appreciation rights and unvested restricted stock units excluded from the diluted
EPS calculation because their effect would have been antidilutive |  |                             | 2,357  |   |      |   | 6,333  |  
|                                                                                                                                                                                                 |  |                             |        |   |      |   |        |  



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NOTE 9LONG-TERM DEBT



|                                                                                                                           |  |               |         |   |                  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                           |  | March 31,2010 |         |   | December 31,2009 |  
|Secured credit agreement expiring July 25, 2013:                                                                           |  |               |         |   |                  |   |         |  
|Term loan                                                                                                                  |  | $             | 95,238  |   |                  | $ | 100,000 |  
|Revolving credit facility                                                                                                  |  |               |        |   |                  |   |        |  
|11.25% Senior Notes due August 1, 2016; interest payable each February 1st and August 1st which commenced
February 1, 2009 |  |               | 240,000 |   |                  |   | 240,000 |  
|Unamortized original issue discount on Senior Notes                                                                        |  |               | (1,229  | ) |                  |   | (1,278  | )
|                                                                                                                           |  |               |         |   |                  |   |         |  
|Total long-term debt                                                                                                       |  |               | 334,009 |   |                  |   | 338,722 |  
|Less: current maturities                                                                                                   |  |               | (6,349  | ) |                  |   | (4,762  | )
|                                                                                                                           |  |               |         |   |                  |   |         |  
|Long-term debt, net of current maturities                                                                                  |  | $             | 327,660 |   |                  | $ | 333,960 |  
|                                                                                                                           |  |               |         |   |                  |   |         |  

On July 25, 2008, HSNi entered into a secured credit agreement with a syndicate of banks relating to a
$150 million term loan and a $150 million revolving credit facility, each having a five-year maturity. Certain HSNi subsidiaries have unconditionally guaranteed HSNis obligations under the credit agreement, which is secured by
substantially all of HSNis assets. The credit agreement bears interest based on HSNis financial leverage and, as of March 31, 2010, the term loan interest rate was equal to LIBOR plus 2.50% (2.75%). The credit agreement contains two
principal financial covenants consisting of a maximum leverage ratio of 2.75x and a minimum interest coverage ratio of 3.00x, among other covenants. HSNi was in compliance with all such covenants as of March 31, 2010, with a leverage ratio of
1.44x and an interest coverage ratio of 7.33x. The amount available to HSNi under the credit agreement is reduced by the amount of commercial and standby letters of credit issued under the revolving credit facility portion of the agreement. As of
March 31, 2010, there were $27.2 million of outstanding commercial and standby letters of credit issued under the revolving credit facility. The ability to draw funds under the revolving credit facility is dependent upon meeting the
aforementioned financial covenants, which may limit HSNis ability to draw the full amount of the facility. As of March 31, 2010, the additional amount that could be borrowed under the revolving credit facility, in consideration of the
financial covenants, was approximately $122.8 million. HSNi capitalized $7.3 million in financing costs related to the credit agreement, and HSNi will amortize these costs to interest expense over the credit agreements five-year life. The
annual fee to maintain the revolving credit facility is 50 basis points on the revolving credit facility portion of the credit agreement.

On July 28, 2008, HSNi issued $240 million of 11.25% senior notes due 2016 (the Senior Notes). The Senior Notes are
unsecured and subordinated to all of HSNis secured debt. The Senior Notes were issued at a discount of $1.6 million which, along with other issuance expenses of $7.3 million, are being amortized to interest expense over the eight
year term of the Senior Notes.

NOTE 10FAIR VALUE MEASUREMENTS

Fair value accounting, as prescribed by GAAP, defines fair value and establishes a framework for measuring fair value based on a
three-level hierarchy:

Level 1Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar
assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3Valuations based on unobservable inputs reflecting HSNis own assumptions, consistent with reasonably available assumptions made
by other market participants. These valuations require significant judgment.



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The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable
approximate fair value because of the short maturity of these items. The following table summarizes the fair value of the Companys financial assets and liabilities which are carried at cost (in millions):



|             |  |                   |       |           |   |                                 |  |         |       |  |   |   |  |   |     
|------------ |  | ----------------- | ----- | --------- | - | ------------------------------- |  | ------- | ----- |  | - | - |  | - | ----
|             |  | March 31, 2010   
|             |  | CarryingValue     |       | FairValue |   | Fair Value Measurement Category
|             |  |                   |       | Level 1   |   | Level 2                         |  | Level 3
|Senior Notes |  | $                 | 240.0 |           | $ | 270.0                           |  | $       | 270.0 |  | $ |  |  | $ |    
|Term Loan    |  |                   | 95.2  |           |   | 91.7                            |  |         |      |  |   |  |  |   | 91.7
|             | 
|             |  | December 31, 2009
|             |  | CarryingValue     |       | FairValue |   | Fair Value Measurement Category
|             |  |                   |       | Level 1   |   | Level 2                         |  | Level 3
|Senior Notes |  | $                 | 240.0 |           | $ | 264.0                           |  | $       | 264.0 |  | $ |  |  | $ |    
|Term Loan    |  |                   | 100.0 |           |   | 96.1                            |  |         |      |  |   |  |  |   | 96.1

The fair value of the
Senior Notes was based upon quoted market information (level 1 criteria) and the fair value of the term loan was based upon discounted cash flows (level 3 criteria).

HSNi measures certain assets, such as intangible assets and property and equipment, at fair value on a non-recurring basis. These assets
are recognized at fair value if they are deemed to be impaired. During the three months ended March 31, 2010 and 2009, there were no assets that were required to be recorded at fair value since no impairment indicators were present.

NOTE 11COMMITMENTS AND CONTINGENCIES

HSNi received a preliminary assessment notification from a state alleging that one of HSNis subsidiaries was required to collect and
remit sales tax to the state. HSNi does not believe that its subsidiary is obligated to collect and remit these taxes, and intends to vigorously defend its position if the states notification results in an assessment. At this time, no
assurances can be given as to the outcome nor can a reasonable estimate of liability, if any, be made.

In the ordinary course
of business, HSNi is a party to various audits and lawsuits. These audits or litigation may relate to claims involving property, personal injury, contract, intellectual property, sales tax and other claims. HSNi establishes reserves for specific
legal or tax compliance matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Management has also identified certain other legal matters where it believes an unfavorable outcome is
not probable and, therefore, no reserve is established. Although management currently believes that an unfavorable resolution of claims against HSNi, including claims where an unfavorable outcome is reasonably possible, will not have a material
impact on the liquidity, results of operations, or financial condition of HSNi, these matters are subject to inherent uncertainties and managements view of these matters may change in the future. HSNi also evaluates other contingent matters,
including tax contingencies, to assess the probability and estimated extent of potential loss. See Note 7 for discussion related to income tax contingencies.



13



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Cautionary Statement Regarding Forward-Looking Information

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act), which are based on managements exercise of business judgment, as well as
assumptions made by and information currently available to management. When used in this document, the words may, will, anticipate, believe, estimate, expect,
intend, and words of similar import, are intended to identify any forward-looking statements. These forward-looking statements include, among other things, statements relating to the following: HSNis future financial performance,
HSNis business prospects and strategy, anticipated trends and prospects in the various markets in which HSNis businesses operate and other similar matters. These forward-looking statements are based on managements current
expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.

Should one or more of these uncertainties, risks or changes in circumstances materialize, or should underlying assumptions prove
incorrect, our actual results could differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to such differences include but are not limited to the following: the impact of the current
macroeconomic environment on consumer confidence and spending levels; whether national economic stimulus initiatives and measures to stabilize the economy will be successful in achieving their objectives within the expected timeframes; other changes
in political, business and economic conditions, particularly those that affect consumer confidence, consumer spending or internet growth; changes in the interest rate environment and developments in the overall credit markets; HSNis business
prospects and strategy, including whether HSNis initiatives will be effective; changes in our relationships with pay television operators, vendors, manufacturers and other third parties; technological or regulatory changes; changes in senior
management; our ability to offer new or alternative products and services in a cost effective manner and consumer acceptance of these products and services; and changes in product delivery costs. Certain of these and other risks and uncertainties
are discussed in HSNis filings with the SEC, including the Risk Factors section in our Annual Report on Form 10-K filed with the SEC on March 4, 2010. Other unknown or unpredictable factors that could also adversely affect
HSNis business, financial condition and results of operations may arise from time to time.

You should not place undue
reliance on these forward-looking statements. We undertake no obligation, and do not intend, to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof,
or to reflect the occurrence of any unanticipated events. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize. Historical results should not be considered an
indication of future performance.

Results of Operations

Net Sales

Net sales primarily relate to the sale of merchandise and are reduced by incentive discounts and actual and estimated sales returns.
Revenue is recorded when delivery to the customer has occurred. Delivery is considered to have occurred when the customer takes title and assumes the risks and rewards of ownership, which is generally on the date of shipment. HSNis sales
policies allow customers to return virtually all merchandise for a full refund or exchange, subject to pre-established time restrictions and, in some cases, restocking fees.



|                |  |                              |         |         |   |   |      |   |        
|--------------- |  | ---------------------------- | ------- | ------- | - | - | ---- | - | -------
|                |  | Three Months Ended March 31,
|                |  | 2010                         |         | %Change |   |   | 2009
|                |  | (Dollars in thousands)      
|HSN             |  | $                            | 518,919 |         | 9 | % |      | $ | 474,928
|Cornerstone     |  |                              | 164,294 |         | 6 | % |      |   | 154,692
|                |  |                              |         |         |   |   |      |   |        
|Total net sales |  | $                            | 683,213 |         | 9 | % |      | $ | 629,620
|                |  |                              |         |         |   |   |      |   |        



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##### Table of Contents

HSNi net sales for the three months ended March 31, 2010 increased 9% or $53.6 million
as compared to the prior year due to a 9% increase at HSN and a 6% increase at Cornerstone. The number of units shipped in the first quarter of 2010 increased 6% to 12.7 million from 11.9 million and the average price point increased 2% to
$59.79 compared to $58.48 in the prior year. Internet sales as a percentage of total net sales for the quarter represented 37.6% of HSNi net sales compared to 36.8% in the prior year.

HSN

Net sales for HSN increased 9% or $44.0 million to $518.9 million as compared to the prior year driven by strong sales increases in
electronics, wellness and fashion. HSN.com sales increased 15% over the prior year and now represent 31.6% of HSNs net sales, up from 30.0% in the prior year. Units shipped increased 6% to 9.9 million from 9.3 million and the average
price point increased 4% to $59.36 due to less promotional activity in the current period and product mix.

HSN merchandise
categories primarily consist of jewelry, fashion (including apparel & accessories), health & beauty and home & other (including housewares, home fashions, electronics, fitness and other). Divisional product mix at HSN is
provided in the table below:



|                                |  |                             |   |  |       |  
|------------------------------- |  | --------------------------- | - |  | ----- | -
|                                |  | Three Months EndedMarch 31, |  
|                                |  | 2010                        |   |  | 2009  |  
|Jewelry                         |  | 14.0                        | % |  | 15.0  | %
|Fashion (apparel & accessories) |  | 12.7                        | % |  | 11.4  | %
|Health & beauty                 |  | 19.0                        | % |  | 18.7  | %
|Home & other                    |  | 54.3                        | % |  | 54.9  | %
|                                |  |                             |   |  |       |  
|Total                           |  | 100.0                       | % |  | 100.0 | %
|                                |  |                             |   |  |       |  

Cornerstone

Net sales for Cornerstone for the first quarter of 2010 increased 6% to $164.3 million despite a 3% reduction in catalog circulation. The
sales growth is attributable to an increase in demand in luxury and outdoor products, the execution of strategic merchandising and marketing initiatives and a reduction in return rates. Return rates declined by 150 basis points to 14.7% due to
product mix and a continued focus on quality improvement programs.

Cost of Sales and Gross Profit

Cost of sales consists primarily of the cost of products sold, shipping and handling costs, compensation and other employee-related costs
(including stock-based compensation) for personnel engaged in warehouse functions and, in the case of HSN, certain allocable general and administrative costs, including certain warehouse costs.



|                                |  |                              |         |   |         |     |    |      |   |         |  
|------------------------------- |  | ---------------------------- | ------- | - | ------- | --- | -- | ---- | - | ------- | -
|                                |  | Three Months Ended March 31, |        
|                                |  | 2010                         |         |   | %Change |     |    | 2009 |  
|                                |  | (Dollars in thousands)       |        
|Gross profit:                   |  |                              |         |  
|HSN                             |  | $                            | 171,609 |   |         | 13  | %  |      | $ | 151,969 |  
|HSN gross profit margin         |  |                              | 33.1    | % |         | 110 | bp |      |   | 32.0    | %
|Cornerstone                     |  | $                            | 64,875  |   |         | 9   | %  |      | $ | 59,255  |  
|Cornerstone gross profit margin |  |                              | 39.5    | % |         | 120 | bp |      |   | 38.3    | %
|HSNi                            |  | $                            | 236,484 |   |         | 12  | %  |      | $ | 211,224 |  
|HSNi gross profit margin        |  |                              | 34.6    | % |         | 110 | bp |      |   | 33.5    | %



bp = basis points



15



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##### Table of Contents

HSN

Gross profit increased 13% to $171.6 million in the first quarter of 2010 compared to $152.0 million in the prior year. Gross profit
margin improved 110 basis points to 33.1% compared to 32.0% in the prior year. The improvement in gross profit margin was driven mainly by improved product margins due to less promotional activity.

Cornerstone

Gross profit increased 9% to $64.9 million in the first quarter of 2010 compared to $59.3 million in the prior year. Gross profit margin
improved 120 basis points to 39.5% from 38.3% in the prior year. The margin improvement was attributable to reduced promotional activity, a decrease in warehousing labor costs and lower shipping costs due to contract negotiations with certain common
carriers completed in the first quarter of the prior year.

Selling and Marketing Expense

Selling and marketing expense consists primarily of advertising and promotional expenditures, compensation and other employee-related
costs (including stock-based compensation) for personnel engaged in customer service, sales and merchandising functions and on-air distribution costs. Advertising and promotional expenditures primarily include catalog production and distribution
costs and online marketing, including fees paid to search engines and third party distribution partners.



|                                         |  |                              |         |   |         |         |    |      |   |         |  
|---------------------------------------- |  | ---------------------------- | ------- | - | ------- | ------- | -- | ---- | - | ------- | -
|                                         |  | Three Months Ended March 31, |        
|                                         |  | 2010                         |         |   | %Change |         |    | 2009 |  
|                                         |  | (Dollars in thousands)       |        
|HSN                                      |  | $                            | 70,796  |   |         | 5       | %  |      | $ | 67,561  |  
|As a percentage of HSN net sales         |  |                              | 13.6    | % |         | (60 bp  | )  |      |   | 14.2    | %
|Cornerstone                              |  | $                            | 49,703  |   |         | (10     | )% |      | $ | 54,956  |  
|As a percentage of Cornerstone net sales |  |                              | 30.3    | % |         | (520 bp | )  |      |   | 35.5    | %
|HSNi                                     |  | $                            | 120,499 |   |         | (2      | )% |      | $ | 122,517 |  
|As a percentage of HSNi net sales        |  |                              | 17.6    | % |         | (190 bp | )  |      |   | 19.5    | %

HSNis selling and
marketing expense in the first quarter of 2010 decreased $2.0 million to $120.5 million and represents 17.6% of net sales as compared to 19.5% in the prior year. This decrease is primarily due to a $4.5 million reduction in catalog costs
associated with a 3% planned reduction in circulation. The decrease was partially offset by an increase in on-air distribution costs associated with higher broadcast rates and additional subscribers in certain markets and an increase in compensation
and other employee-related costs.



16



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##### Table of Contents

General and Administrative Expense

General and administrative expense consists primarily of compensation and other employee-related costs (including stock-based
compensation) for personnel engaged in finance, legal, tax, human resources, information technology and executive management functions, bad debts, facilities costs and fees for professional services.



|                                         |  |                              |        |   |         |        |   |      |   |        |  
|---------------------------------------- |  | ---------------------------- | ------ | - | ------- | ------ | - | ---- | - | ------ | -
|                                         |  | Three Months Ended March 31, |       
|                                         |  | 2010                         |        |   | %Change |        |   | 2009 |  
|                                         |  | (Dollars in thousands)       |       
|HSN                                      |  | $                            | 39,673 |   |         | 5      | % |      | $ | 37,638 |  
|As a percentage of HSN net sales         |  |                              | 7.6    | % |         | (30 bp | ) |      |   | 7.9    | %
|Cornerstone                              |  | $                            | 14,766 |   |         | 5      | % |      | $ | 14,072 |  
|As a percentage of Cornerstone net sales |  |                              | 9.0    | % |         | (10 bp | ) |      |   | 9.1    | %
|HSNi                                     |  | $                            | 54,439 |   |         | 5      | % |      | $ | 51,710 |  
|As a percentage of HSNi net sales        |  |                              | 8.0    | % |         | (20 bp | ) |      |   | 8.2    | %

HSNis general and
administrative expense in the first quarter of 2010 increased 5% to $54.4 million compared to $51.7 million in the prior year. This increase is primarily due to compensation expense related to performance driven incentives and stock-based
compensation.

Production and Programming Expense

Production and programming expense includes costs related to the production of HSNs television network. These costs consist
primarily of compensation and other employee-related costs (including stock-based compensation) for personnel engaged in production and programming at HSN. Expenses associated with on-air distribution of HSN, including expenses relating to pay
television operators, are included in selling and marketing expense.



|                                   |  |                              |        |   |         |        |   |      |   |        |  
|---------------------------------- |  | ---------------------------- | ------ | - | ------- | ------ | - | ---- | - | ------ | -
|                                   |  | Three Months Ended March 31, |       
|                                   |  | 2010                         |        |   | %Change |        |   | 2009 |  
|                                   |  | (Dollars in thousands)       |       
|Production and programming expense |  | $                            | 14,100 |   |         | 4      | % |      | $ | 13,503 |  
|As a percentage of HSN net sales   |  |                              | 2.7    | % |         | (10 bp | ) |      |   | 2.8    | %

Production and programming
expense for the first quarter of 2010 increased 4% to $14.1 million compared to $13.5 million in the prior year. As a percentage of HSNs net sales, production and programming expense was 2.7% compared to 2.8% in the prior year period.

Depreciation



|                                  |  |                              |       |   |         |        |    |      |   |       |  
|--------------------------------- |  | ---------------------------- | ----- | - | ------- | ------ | -- | ---- | - | ----- | -
|                                  |  | Three Months Ended March 31, |      
|                                  |  | 2010                         |       |   | %Change |        |    | 2009 |  
|                                  |  | (Dollars in thousands)       |      
|HSN                               |  | $                            | 7,605 |   |         | 9      | %  |      | $ | 6,974 |  
|Cornerstone                       |  |                              | 2,205 |   |         | (11    | )% |      |   | 2,477 |  
|                                  |  |                              |       |   |         |        |    |      |   |       |  
|HSNi                              |  | $                            | 9,810 |   |         | 4      | %  |      | $ | 9,451 |  
|                                  |  |                              |       |   |         |        |    |      |   |       |  
|As a percentage of HSNi net sales |  |                              | 1.4   | % |         | (10 bp | )  |      |   | 1.5   | %

HSNis depreciation
for the three months ended March 31, 2010 increased 4% compared to the same prior year period primarily due to incremental depreciation associated with recent capital expenditures, partially offset by certain fixed assets becoming fully
depreciated.



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##### Table of Contents

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure and is defined in Note 4 of Notes to Consolidated Financial Statements.



|                                         |  |                              |        |   |         |     |    |      |   |        |   
|---------------------------------------- |  | ---------------------------- | ------ | - | ------- | --- | -- | ---- | - | ------ | --
|                                         |  | Three Months Ended March 31, |       
|                                         |  | 2010                         |        |   | %Change |     |    | 2009 |  
|                                         |  | (Dollars in thousands)       |       
|HSN                                      |  | $                            | 50,314 |   |         | 43  | %  |      | $ | 35,259 |   
|As a percentage of HSN net sales         |  |                              | 9.7    | % |         | 230 | bp |      |   | 7.4    | % 
|Cornerstone                              |  | $                            | 1,478  |   |         | 116 | %  |      | $ | (9,179 | ) 
|As a percentage of Cornerstone net sales |  |                              | 0.9    | % |         | 680 | bp |      |   | (5.9   | )%
|HSNi                                     |  | $                            | 51,792 |   |         | 99  | %  |      | $ | 26,080 |   
|As a percentage of HSNi net sales        |  |                              | 7.6    | % |         | 350 | bp |      |   | 4.1    | % 

HSNis Adjusted
EBITDA in the first quarter of 2010 increased 99% or $25.7 million from 2009 and represents 7.6% of net sales as compared to 4.1% in the prior year. The increase in Adjusted EBITDA is primarily due to the increase in net sales, the 110 basis
point improvement in gross profit margin and leverage over operating expenses.

Operating Income (Loss)



|                                         |  |                              |        |    |         |     |    |      |   |         |   
|---------------------------------------- |  | ---------------------------- | ------ | -- | ------- | --- | -- | ---- | - | ------- | --
|                                         |  | Three Months Ended March 31, |       
|                                         |  | 2010                         |        |    | %Change |     |    | 2009 |  
|                                         |  | (Dollars in thousands)       |       
|HSN                                      |  | $                            | 39,295 |    |         | 50  | %  |      | $ | 26,151  |   
|As a percentage of HSN net sales         |  |                              | 7.6    | %  |         | 210 | bp |      |   | 5.5     | % 
|Cornerstone                              |  | $                            | (1,800 | )  |         | 85  | %  |      | $ | (12,249 | ) 
|As a percentage of Cornerstone net sales |  |                              | (1.1   | )% |         | 680 | bp |      |   | (7.9    | )%
|HSNi                                     |  | $                            | 37,495 |    |         | 170 | %  |      | $ | 13,902  |   
|As a percentage of HSNi net sales        |  |                              | 5.5    | %  |         | 330 | bp |      |   | 2.2     | % 

HSNis operating
income for the first quarter of 2010 increased 170% or $23.6 million to $37.5 million as compared to $13.9 million in the prior year. The operating margin in 2010 improved to 5.5% compared to 2.2% in 2009. The increase is primarily due to the
increase in net sales and the 110 basis point increase in gross profit margin, offset slightly by an increase in non-cash operating expenses.

Other (Expense) Income



|                                  |  |                              |        |    |         |        |    |      |   |        |   
|--------------------------------- |  | ---------------------------- | ------ | -- | ------- | ------ | -- | ---- | - | ------ | --
|                                  |  | Three Months Ended March 31, |       
|                                  |  | 2010                         |        |    | %Change |        |    | 2009 |  
|                                  |  | (Dollars in thousands)       |       
|Interest income                   |  | $                            | 82     |    |         | 141    | %  |      | $ | 34     |   
|Interest expense                  |  |                              | (8,376 | )  |         | (6     | )% |      |   | (8,950 | ) 
|                                  |  |                              |        |    |         |        |    |      |   |        |   
|Other (expense) income, net       |  | $                            | (8,294 | )  |         | (7     | )% |      | $ | (8,916 | ) 
|                                  |  |                              |        |    |         |        |    |      |   |        |   
|As a percentage of HSNi net sales |  |                              | (1.2   | )% |         | (20 bp | )  |      |   | (1.4   | )%

Interest expense
primarily relates to the $240 million of 11.25% senior notes and the five-year term loan. The decrease in interest expense in the first quarter of 2010 compared to 2009 is due to the repayments of the term loan and a decrease in the average interest
rate of the term loan.



18



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##### Table of Contents

Income Tax Provision

For the three months ended March 31, 2010, HSNi recorded a tax provision from continuing operations of $11.5 million which
represents an effective tax rate of 39.5%. For the three months ended March 31, 2009, HSNi recorded a tax provision from continuing operations of $2.0 million which represents an effective tax rate of 40.2%. The effective tax rates of 39.5% and
40.2% for the three months ended March 31, 2010 and 2009, respectively, are higher than the federal statutory rate of 35% due principally to state income taxes.

Liquidity and Capital Resources

As of March 31, 2010, HSNi had $261.1 million of cash and cash equivalents, down from $269.9 million as of December 31,
2009.

Net cash used in operating activities attributable to continuing operations for the three months ended March 31,
2010 was $10.0 million compared to $39.6 million generated in the same period last year, a decrease of $49.6 million. This variance is principally due to an increase in inventories to support sales growth and increased payments of trade payables and
income taxes.

Net cash used in investing activities attributable to continuing operations for the three months ended
March 31, 2010 of $4.9 million resulted from capital expenditures. The capital expenditures were for investments in information technology, campus renovations and broadcasting-related investments. Net cash used in investing activities
attributable to continuing operations in 2009 of $7.5 million was primarily at HSN and was for investments in equipment relating to high-definition television programming, campus renovations and other information technology and broadcast-related
investments.

Net cash provided by financing activities attributable to continuing operations for the three months ended
March 31, 2010 was $6.1 million due to cash proceeds of $10.4 million received from the exercise of stock options, partially offset by the repayment of $4.8 million of long-term debt. As of March 31, 2010, $95.2 million was outstanding
under the term loan and no amounts were outstanding under the revolving credit facility, except for letters of credit. Net cash used in financing activities attributable to continuing operations in 2009 was $23.8 million due to repayments of $3.8
million of long-term debt and $20.0 million for the revolving credit facility.

The credit agreement contains two principal
financial covenants consisting of a maximum leverage ratio of 2.75x and a minimum interest coverage ratio of 3.00x, among other covenants. HSNi was in compliance with all such covenants as of March 31, 2010, with a leverage ratio of 1.44x and
an interest coverage ratio of 7.33x. The amount available under the credit agreement is reduced by the amount of commercial and standby letters of credit issued under the revolving credit facility portion of the agreement. As of March 31, 2010,
there were $27.2 million of outstanding commercial and standby letters of credit issued under the revolving credit facility. The ability to draw funds under the revolving credit facility is dependent upon meeting the aforementioned financial
covenants, which may limit HSNis ability to draw the full amount of the facility. As of March 31, 2010, the additional amount that could be borrowed under the revolving credit facility, in consideration of the financial covenants, was
approximately $122.8 million.

HSNi anticipates that it will need to make capital and other expenditures in connection with
the development and expansion of its operations. HSNis ability to fund its cash and capital needs will be affected by its ongoing ability to generate cash from operations, the overall capacity and terms of its financing arrangements as
discussed above, and access to the capital markets. HSNi believes that its cash on hand, its anticipated operating cash flows, its available unused portion of the revolving credit facility and its access to capital markets will be sufficient to fund
its operating needs, capital, investing and other commitments and contingencies for the foreseeable future.

Recent Accounting
Pronouncements

See Note 2 of Notes to Consolidated Financial Statements for the discussion of recent accounting
pronouncements.

Seasonality

HSNi is affected by seasonality, although historically our business has exhibited less seasonality than many other retail businesses. Our
sales levels are generally higher in the fourth quarter.



19



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##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

For a description of HSNis market risks, see Item 7A. Quantitative and Qualitative Disclosures about Market Risk in
HSNis Annual Report on Form 10-K for the year ended December 31, 2009. No material changes have occurred in HSNis market risks since December 31, 2009.



|Item 4. | Controls and Procedures
|------- | -----------------------

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act) as of March 31, 2010. Based on that evaluation, management has concluded that the disclosure controls and procedures are effective to ensure that
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and to ensure that
information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2010 that
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



20



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##### Table of Contents

PART IIOTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

In the
ordinary course of business, we are involved in various legal matters arising out of our operations. These matters may relate to claims involving property, personal injury, contract, intellectual property, sales tax and other claims. At May 5,
2010, we are not a party to any legal proceedings that are reasonably expected to have a material adverse effect on our business, results of operations, financial condition or cash flows. The results of these matters cannot be predicted with
certainty and an unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations, financial condition or cash flows.

Rules of the SEC require the description of material pending legal proceedings, other than ordinary, routine litigation incident to the
companys business, and advise that proceedings ordinarily need not be described if they primarily involve damage claims for amounts (exclusive of interest and costs) not exceeding 10% of the current assets of the company and its subsidiaries
on a consolidated basis. In the judgment of management, none of the pending litigation matters which HSNi and its subsidiaries are defending involves or is likely to involve amounts of that magnitude.



|Item 1A. | Risk Factors
|-------- | ------------

See Part I,
Item 1A., Risk Factors, of HSNis Annual Report on Form 10-K for the year ended December 31, 2009, for a detailed discussion of the risk factors affecting HSNi. There have been no material changes from the risk factors
described in the annual report.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

None



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None



|Item 4. | Removed and Reserved
|------- | --------------------



|Item 5. | Other Information
|------- | -----------------

None



|Item 6. | Exhibits
|------- | --------



|               |  |                                                                                                                                                                                                |  |               
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|Exhibit Number |  | Description                                                                                                                                                                                    |  | Location      
|31.1           |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act. |  | Filed herewith
|               |  |                                                                                                                                                                                               
|31.2           |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act. |  | Filed herewith
|               |  |                                                                                                                                                                                               
|32.1           |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.                                                  |  | Filed herewith
|               |  |                                                                                                                                                                                               
|32.2           |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.                                                  |  | Filed herewith



21



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Date: May 5, 2010



HSN, INC.By:

/s/ JUDY A. SCHMELINGJudy A. Schmeling
Executive Vice President and Chief Financial Officer




22